TAN Definition

TAN stands for Tax Deduction and Collection Account Number, a 10-digit alphanumeric number issued by the Income Tax Department of a country (e.g., India) to entities that are required to deduct or collect tax at source on behalf of the government. In the context of Human Resources (HR), organizations need a TAN when they pay employees in order to deduct tax at source (TDS) from their salaries. The TAN is used in all communications related to TDS with the tax department.

TAN Key Features

Unique Identifier: TAN is a unique identification number assigned to each entity that deducts or collects tax at source.
Mandatory for TDS/TCS Compliance: It is mandatory for all entities that must deduct or collect tax at source to obtain and quote their TAN in TDS/TCS (Tax Collected at Source) returns, payments, and other related documents.
Legal Requirement: Failure to obtain a TAN or to quote it in specified transactions can result in penalties.

How Does It Work?

Application: An organization applies for a TAN through the tax department’s official website or by submitting the application form at designated centers.
Verification and Issuance: The tax department verifies the application. Upon successful verification, a TAN is issued to the organization.
Quoting TAN: The organization must quote its TAN in all TDS/TCS returns, payments, certificates, and correspondence with the tax department.
TDS/TCS Filing: The TAN is used to file quarterly TDS/TCS returns, which detail the tax deducted or collected by the organization on behalf of its employees or other payees.
Issuance of Certificates: Using the TAN, organizations issue TDS certificates to their employees or payees, confirming the amount of tax deducted and deposited with the government.